Fei Protocol

Fei Protocol was an Ethereum-based project issuing FEI, a US dollar-pegged stablecoin, alongside TRIBE, a governance token controlling a decentralized autonomous organization. The protocol was positioned as an alternative to centrally issued stablecoins such as USDT, USDC and BUSD and to over-collateralized designs such as MakerDAO's DAI, which sources describe as capital-inefficient. FEI had an uncapped supply that tracked demand; new FEI entered circulation through sale along a bonding curve that approached and then fixed at the $1 peg, initially denominated only in ETH with the intent to support curves denominated in any ERC-20 token. The launch bonding curve had a bootstrapping target, called Scale, of 250,000,000 FEI, after which the curve price would fix at a governance-set buffer above the peg, creating a price ceiling that arbitrageurs could act on. Deliberately, no third-party tokens such as USDC or USDT were to be used as collateral on the bonding curve.

Rather than allowing users to sell FEI back on the bonding curve, the protocol retained incoming ETH as Protocol Controlled Value (PCV) — assets owned outright by the protocol rather than lent by users — and deployed that PCV to create liquid secondary markets. In version 1, the peg was maintained through "direct incentives": mints and burns applied directly to traders' balances on an incentivized Uniswap market in proportion to distance from the peg, so that volatility below the peg was net deflationary. Sources compare this mechanism to, but distinguish it from, rebasing tokens such as Ampleforth and Yam, since balance adjustments applied only to participants in incentivized behaviors. Fei v2, launched 2021-12-15, replaced the direct-incentive design with 1:1 redeemability of FEI for $1 of protocol-controlled assets, reduced redemption fees from 1% to 0.5%, directed part of PCV appreciation to TRIBE buybacks, and managed PCV allocation algorithmically through a Balancer v2 investment pool, shifting toward stable assets such as DAI as the collateralization ratio approached 100%.

TRIBE, an ERC-20 governance token on Ethereum with a total supply of 1,000,000,000, governed PCV allocation and bonding-curve parameters. Reported allocation was 40% DAO treasury, 20% IDO, 13% Fei core team, 10% Genesis Group, 10% staking rewards, 5% core team investors and 2% grants. TRIBE traded on decentralized venues including Uniswap and centralized exchanges including Binance, Gate.io and KuCoin.

Founding story

Sources state the project's name derives from Rai, or Fei, the stone currency of the Micronesian island of Yap, which inspired its vision of a decentralized, fair, liquid and scalable stablecoin platform on Ethereum. Joey Santoro is identified as the founder of Fei Protocol; the development entity is Fei Labs. No incorporation date or headquarters location is given in the sources.

Business model

The protocol issued a stablecoin against assets it acquired and owned outright (Protocol Controlled Value) rather than assets deposited as user collateral, and governed the deployment of those assets through a token-holder DAO. Under v2, protocol equity accrued to TRIBE holders, with a portion of PCV appreciation used to buy back TRIBE.

Sources describe protocol-level value accrual rather than conventional revenue: PCV assets could be deployed to seek yield, redemption fees were charged on FEI redemptions (reduced from 1% to 0.5% in v2), and 20% of protocol equity was designated for automated TRIBE buybacks executed via a Balancer smart pool.

Traction

Genesis raised 639,000 ETH (~$1.3B) from over 17,000 participants in March/April 2021; the FEI-TRIBE Uniswap pool was cited as the largest on Uniswap with $2.6B in liquidity. FEI market capitalization was $536M in October 2021, with founder Joey Santoro citing over $600M in protocol equity. At the December 2021 Rari merger, FEI circulating supply was $735M and Fuse TVL exceeded $1.1B. Reported TRIBE circulating supply was 455,015,530 of a 1,000,000,000 total.

Latest developments

On 2022-08-19 Fei Labs proposed shutting down Tribe DAO, the entity formed by the Fei–Rari merger, in what commentary described as the unwinding of the largest merger in DeFi history.